Supplies of US-sanctioned Iranian oil to China have surged to a 10-year high in August, according to data from commodity intelligence company Kpler. Shipments from Iran are expected to reach 1.5 million barrels per day (bpd) this month, the highest since 2013. This increase in exports can be attributed to rising global prices, as the discounted crude becomes more attractive to buyers.
China, as the world’s top crude importer, has been increasing its purchases of cheaper Iranian oil this year. The country has also intensified competition with India for cut-price Russian barrels. Many independent Chinese refiners in Shandong province have started buying higher volumes of Iranian crude, taking advantage of the hefty discounts. Currently, Iran’s two main grades of crude are trading at discounts of more than $10 a barrel to Brent, making them considerably cheaper than Russian blends.
Homayoun Falakshahi, a senior oil analyst at Kpler, explains that the higher prices go, the better the risk-reward ratio for Shandong refiners to opt for Iranian crude. These factors have contributed to the surge in Iranian oil exports to China, with an average of 917,000 bpd of oil imported between January and July this year.
While there is no official data on shipments of Iranian crude to China, the market relies on data from tanker-tracking companies. However, the International Energy Agency (IEA) confirmed in its recent report that Tehran’s daily exports have been around one million bpd in 2023. The IEA also noted that despite severe financial restrictions, Iran managed to increase its crude oil production by about 140,000 barrels per day in 2022 to an average of 2.5 million barrels per day. It seems that Tehran has maintained its crude sales to China, which have been around one million barrels per day since the third quarter of last year.
Furthermore, Iran has ramped up its crude exports to a five-year high of 1.4 million bpd in August, according to Davoud Mansour, head of Iran’s Planning and Budget Organization. The Islamic republic aims to further boost its oil production to 3.5 million bpd by the end of September.
The surge in Iranian oil exports to China reflects the country’s strategy to secure reliable sources of crude and diversify its suppliers. By taking advantage of the discounts offered by Iran, China is able to reduce its dependence on other more expensive markets. This trend also highlights the ongoing competition between major Asian economies, such as China and India, for affordable oil.
In conclusion, supplies of US-sanctioned Iranian oil to China have reached a 10-year high in August, driven by attractive discounts and rising global prices. China’s status as the world’s top crude importer has led to increased purchases of cheaper Iranian oil. The surge in exports reflects Iran’s efforts to maintain its crude sales to China, despite severe financial restrictions. Additionally, Iran aims to further boost its oil production in the coming months. This trend highlights the competition among major Asian economies for affordable and reliable oil sources.
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